Given how assiduously the government has pushed ahead with its programme for special economic zones (or SEZs), it should not be difficult to guess how it will treat the cautionary report on the subject by the parliamentary standing committee. The committee, under the chairmanship of Murli Manohar Joshi, has suggested a series of changes to the law governing SEZs, from the maximum permissible size to the tax treatment of processing and non-processing areas in these zones. There are also recommendations on the acquisition of land, the rehabilitation of those whose land is acquired, and much else. And the committee recommends that until these issues are resolved and the law changed, the whole programme should be stopped in its tracks. | |
| Reports by parliamentary standing committees are recommendatory in nature, and do not have to be accepted by the government. What might make a difference this time is that the Left parties too are uncomfortable with the way the SEZ programme has unfolded, though with the law already passed on the subject, the Left's position as a swing player for fresh legislation is of no consequence. |
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| One issue that the committee has not dealt with, it would seem, is what good these SEZs will do. The figures available suggest that over 450 zones will cover a total area of just under 2,000 sq km""or an average of 4 sq km per zone. That average hides a complete range of sizes, from 20 (or even 50) sq km for multi-product zones to single-product ones that might be little bigger than a large building. If the logic of these zones is that they will provide superior infrastructure and be better managed than the average industrial "estate" that state governments set up, then the smaller ones make no sense at all""and only add to the administrative hassles of supervising many hundreds of Customs-free zones. It should also be clear that, from a macro-economic perspective, any real impact on the export numbers will come from the big, multi-product zones""except that these are precisely the ones that have ignited concerns about forcible land acquisition. |
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| There are other contentious issues as well. The decision to permit a higher-than-usual percentage of the zone's land area to be non-processing zones (i.e. adding no economic value) is what has given rise to the suspicion that some of the zones are really designed as real estate projects. The fairly tight prescriptions that had been put in place on tax benefits, which would be available for fresh investment and not for the transfer of existing facilities from the domestic tariff area, have become another bone of contention""and last week's decision to permit some old machinery to be used in these zones is typical of the lax rules that are being framed. The finance minister's original concern on the loss of tax revenue is of course an argument that found no purchase with his ministerial colleagues. |
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| In short, despite criticism within and outside the government, cautionary reports by parliamentary committees and doubts expressed by the government's allies, nothing it seems can stop of the march of the SEZs as currently conceived. The issue of forcible land acquisition has in some cases been halted following public criticism but, on the strength of the record so far, it would seem that the commercial interests that are pushing hard for these zones will get their way. |
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